[Edaily Reporter Kim Hyung-wook ] KIA CORPORATION increased its revenue and operating profit in the third quarter of this year, driven by strong sales and reduced tariff burdens. However, due to the longer-than-expected war in the Middle East and rising raw material prices, the company fell short of its initial expectations for a recovery in profitability. While sales growth is expected to continue in the fourth quarter, it is difficult to be optimistic about a rapid rebound in earnings due to external factors such as the war and exchange rates.

Despite short-term profitability pressures, KIA CORPORATION plans to pursue medium- to long-term growth by continuing its transition to electric vehicles. The company aims to improve the profitability of electric vehicles to the same level as hybrid vehicles within two to three years by expanding sales volume and reducing the cost of core components, such as batteries.

◇Strong EV Sales Coupled with Easing U.S. Tariff Burden

On the 30th, KIA CORPORATION announced that for the third quarter of this year, on a consolidated basis, revenue reached 31.597 trillion won and operating profit reached 1.818 trillion won, representing year-over-year increases of 10.1% and 24.3%, respectively. The operating profit margin rose by 0.7 percentage points to 5.8%. Net income fell 9.6% to 1.286 trillion won, primarily due to a decrease in non-operating income and expenses.

Global wholesale sales reached approximately 847,000 units, up 7.9% year-over-year, while local sales also rose 6.9% to approximately 829,000 units. These are remarkable figures amid a global slump in passenger car sales. Market share in the domestic and U.S. markets reached record highs for the quarter at 36.8% and 5.8%, respectively. Global retail sales of electrified vehicles, including electric and hybrid models, rose 47.0% to approximately 300,000 units, and their share of total sales increased to 36.2%.

The reduction in tariff burdens played a major role in the increase in operating profit. Tariff costs decreased by 533 billion won, falling from 1.234 trillion won in the same period last year to 701 billion won. The improvement in profits was also supported by increased sales volume, a more favorable average exchange rate compared to the previous year, and the exchange rate valuation effect on sales warranty provisions.

◇Middle East War and Weak Exchange Rate Hinder Further Profitability Gains

However, the prolonged war in the Middle East acted as a constraint on further profitability gains. Wholesale sales in Africa and the Middle East fell by 28.4% to approximately 42,000 units. The fallout from the war extended beyond disruptions to local sales, spreading to higher prices for raw materials such as aluminum and copper, as well as increased logistics costs. KIA CORPORATION estimated that the impact on earnings from rising material costs, sales disruptions in Africa and the Middle East, and increased logistics costs amounted to approximately 600 billion won. This is equivalent to a reduction in the operating profit margin of about 1.9 percentage points.

Kim Seung-jun, Executive Vice President and Head of KIA CORPORATION’s Finance Division, stated during the earnings call that day, “In the first half of the year, we had expected the war in the Middle East to be largely resolved by the third quarter, but our forecast was off,” adding, “The fallout from the war is expected to continue at least through the end of the year.”

The recent strengthening of the Korean won also appears to be a contributing factor. Although the average won-dollar exchange rate in the third quarter was higher than in the same period last year, it fell compared to the second quarter, leading to a decline in profits from the previous quarter. KIA CORPORATION’s third-quarter operating profit decreased by 30.8% from the previous quarter, and its operating profit margin also fell from 8.0% to 5.8%.

◇“Projected to Maintain Current Level in Q4… EVs to Become Profitable Within 2–3 Years”

KIA CORPORATION is maintaining its sales target of 3.35 million units for this year, but based on the assessment that current adverse business conditions will persist into the fourth quarter, it expects profitability to fall slightly short of the initially projected level.

Executive Vice President Kim said, “Sales growth is expected to continue in the fourth quarter,” but added, “It does not appear likely that profitability will see a dramatic turnaround.”

Challenges also remain due to the expansion of electric vehicle sales. While per-vehicle EV incentives in Europe remained at levels similar to those in the second quarter, increased sales of entry-level EVs—such as the EV2, EV3, and EV4, which are relatively less profitable—impacted overall profitability. As the company works to expand its market share in the EV sector, it is simultaneously grappling with price competition and the burden of incentives.

KIA CORPORATION emphasized that expanding EV sales is a necessary step to secure future competitiveness. The company explained that while hybrid vehicles also faced difficulties in securing profitability and sales volume during their initial launch, they now generate profitability on par with internal combustion engine vehicles.

Executive Vice President Kim stated, “It is difficult to survive in Europe without EV sales,” adding, “We will continue our current strategy this year and next.” He continued, “We are pursuing internal cost reductions, such as normalizing incentives and lowering battery prices,” and said, “Within two to three years, we will be in a position to return to profitability, just as we did with hybrids.”

KIA CORPORATION is pursuing a recovery in medium- to long-term profitability based on these cost improvements and sales growth. Despite adverse external conditions, the company is maintaining its existing medium- to long-term plans, including a target operating profit margin of 10% by 2030.

Executive Vice President Kim stated, “We have established strategies for electric vehicles, hybrids, and internal combustion engine vehicles tailored to each region,” adding, “We will offset external pressures through internal structural improvements and our own cost-cutting measures.”

Meanwhile, KIA CORPORATION reaffirmed its existing policy of prioritizing dividends for shareholder returns. KIA CORPORATION announced policies including a minimum dividend of 6,000 won per share and a total shareholder return (TSR) of 35 percent, stating, “We will keep that promise,” and adding, “For now, we will prioritize our dividend policy over share buybacks and cancellations.”